MSME Amendment Bill 2026 and the 45-Day Rule: How I Read Them

Live legislative status, as of 15 September 2026

A note on how this was verified: the passage dates and the Bill's delayed-payment features come from the Press Information Bureau's releases of 7 and 11 August 2026, and the Bill number, House of introduction and commencement clause from the Bill text as introduced in the Rajya Sabha. Presidential assent and commencement notifications were not confirmed on an official site for this update, so check the e-Gazette or PIB before relying on a new provision.

What changed: the news-update block

• Latest development: Parliament passed the Bill: the Rajya Sabha on 3 August 2026 and the Lok Sabha on 7 August 2026.
• Exact date: Introduced in the Rajya Sabha on 28 July 2026; passed on 3 August 2026 (Rajya Sabha) and 7 August 2026 (Lok Sabha).
• Source: Press Information Bureau (release of 7 August 2026 and backgrounder of 11 August 2026) and the Bill text as introduced.
• Practical consequence today: None until the amendments are notified into force. The Bill does not change the 45/15-day rule or the interest formula, so keep operating under them.
• What the Bill does not change: The 45-day cap, the 15-day default, the 3× bank rate interest formula and Section 43B(h). It does rework MSME classification (investment and turnover) and makes registration free and voluntary, but only from notified dates.
• Next expected update to this page: Once commencement is notified, this block and the comparison table further down will be rewritten with the enacted clauses, sections, and a revised headline (the note at the end of this article sets out what changes at each stage).

The existing MSME payment rule, in one table

This is the law as it stands today, under Sections 15 and 16 of the MSMED Act, 2006, unaffected by anything currently proposed.

The 15-day vs 45-day confusion, cleared up

Two different, correct numbers get quoted for the same law, and most confusion comes from not knowing which one applies to a given invoice.

15 days is the default. If a buyer and a registered micro or small enterprise never put a payment period in writing (no clause in the purchase order, no agreed term in the contract), the law fills the gap with 15 days from acceptance. This is the fallback, not the norm; most commercial relationships do specify a term.

45 days is the ceiling on what can be agreed. If the parties do put a period in writing, they are free to agree to anything up to 45 days (15, 21, 30, or 45), but they cannot validly agree to more. A purchase order that says "60 days net" or "our standard is 90 days" is asking for something the Act does not permit; as far as the supplier's statutory rights go, the clock still runs out at day 45.

Acceptance, not the invoice date, usually starts the clock. The invoice date is a paperwork event; the day of acceptance is what the Act actually anchors to: the day of actual delivery of goods or completion of services. If the buyer raises a written, timely objection (within 15 days of delivery) about a genuine defect or shortfall, the clock resets to run from when that objection is resolved. If no such objection is raised in that window, acceptance is deemed to have happened on delivery day, full stop. Silence does not stall the clock; it satisfies it.

A simple timeline example. A packaging supplier delivers cartons to a manufacturer on 1 June. The PO says "45 days." The manufacturer says nothing about any defect. Because no written objection arrived within 15 days (by 16 June), the goods are deemed accepted on 1 June, the actual delivery date. Counting 45 days from 1 June puts the appointed day at 16 July. If payment lands on 1 September, that is 47 days late, and interest runs from 17 July to 1 September, not from the invoice date or from 16 June.

Where this gets harder is a live, documented quality dispute: if the buyer did object in writing within 15 days, the "day of acceptance" shifts to whenever that objection was resolved, which can be weeks or months later depending on how the dispute played out. In that situation, the answer to "when was my 45 days" depends on the facts and the paper trail, not a clean formula, so get it checked before assuming a date.

Who is protected, and who is not

Micro and small enterprises (as classified under the current Udyam criteria) are the enterprises the 45/15-day rule and statutory interest actually protect, as suppliers. Medium enterprises are not covered by Sections 15–16, even though "MSME" as a term includes them for registration, lending, and other purposes. It is a common point of confusion.

Manufacturing and service businesses are squarely within the Act's definition of "enterprise." Traders (wholesale and retail) sit in a specifically carved-out grey zone: government office memoranda from 2021 extended Udyam eligibility to traders for priority-sector lending purposes only, while explicitly excluding them from the delayed-payment benefits under the Act. Many traders register on Udyam anyway for the lending advantage; they should not assume the 45-day interest right travels with that registration.

Entity type does not matter. Proprietorships, partnerships, LLPs, and companies are all eligible as suppliers, as are individual freelancers operating a genuine registered enterprise, provided the underlying activity qualifies and the enterprise is validly Udyam-registered.

Registration timing matters. The protection is generally understood to attach to a supplier that was validly registered as micro or small at the relevant time of supply. An invoice raised before registration existed sits in uncertain territory, and a business that later reclassifies (say, from micro to small as turnover grows) should expect its current classification, not a historical one, to govern new invoices going forward.

Where a court or MSEFC has taken a different view on any of these boundary questions than the general position described here, the answer may depend on the facts, registration timing, contract terms, and applicable judicial interpretation. This is not a settled area free of dispute, and a materially disputed classification is worth a professional opinion before you rely on it for a large claim.

The interest that makes buyers pay attention

Section 16 gives the 45/15-day rule real teeth. A buyer who pays after the appointed day owes the supplier compound interest, with monthly rests, at three times the RBI-notified bank rate, and three features make this different from an ordinary late fee:

1. It is statutory, not contractual. No interest clause is needed on the invoice; the entitlement exists by operation of law and cannot be waived away by a clause in the buyer's paperwork.
2. It compounds monthly. Interest accrues on interest every month the payment remains outstanding, not just once at the end.
3. The multiplier is punitive by design. Three times the bank rate sits well above typical commercial borrowing costs: Parliament built in a real financial incentive to pay on time.

As of 19 July 2026, the RBI Bank Rate is 5.50% per annum (confirmed on rbi.org.in; the repo rate, a different figure, is separately 5.25%). That puts the statutory rate at 16.50% per annum, compounding monthly, for any MSE payment currently overdue. This figure moves at each bi-monthly Monetary Policy Committee review, so always check the current bank rate before relying on a figure for an actual claim; a stale rate produces a stale answer.

There is also a lesser-known cross-check that works in a supplier's favour: companies must disclose in their statutory financial filings the amounts outstanding to micro and small enterprises beyond the appointed day, plus the interest accrued. A buyer who habitually delays MSME payments has to surface that fact, and the associated interest liability, to auditors, lenders, and anyone reading the accounts. Mentioning your Udyam number on invoices is what makes a buyer's finance team correctly flag you for this disclosure in the first place; see our companion piece on MSME registration benefits for the wider case for registering.

Four worked interest examples

These are educational estimates using a standard 30-day-month convention for the monthly rests; an actual MSEFC award or court decree may use calendar months and could differ slightly. The interactive calculator on this page, also available as a standalone MSME delayed-payment interest calculator, runs the same logic on your own dates; use it, or a CA, before relying on a figure for a real claim.

Example 1: a small, short delay. Invoice ₹1,00,000, a written 30-day agreed term, goods accepted on 1 January. The appointed day is 31 January. Payment actually lands 60 days after that (roughly 1 April), 60 days delayed. At a 16.50% annual statutory rate compounding monthly, that works out to roughly ₹2,750–₹2,850 of interest on top of the ₹1,00,000 principal, so a total claim of about ₹1,02,800.

Example 2: a longer delay on a larger invoice. Invoice ₹5,00,000, a written 45-day agreed term, goods accepted on 1 March. The appointed day is 15 April. Payment is made 120 days late (mid-August). Over that roughly four-month delay, compounding monthly at 16.50% produces an estimated interest figure in the region of ₹28,000–₹29,000, a real cost the buyer has quietly taken on by treating the supplier as free short-term credit.

Example 3: a large invoice with a part-payment. Invoice ₹25,00,000, accepted on 1 February with a 45-day term (appointed day 18 March). The buyer pays ₹10,00,000 on 1 June and the remaining ₹15,00,000 on 1 September. Interest runs on the full ₹25,00,000 from 18 March to 1 June (about 75 days), and then only on the remaining ₹15,00,000 from 1 June to 1 September (about 92 days). The two segments are calculated separately and added together. This is exactly the two-stage computation the calculator above performs when you enter a part-payment date, and it typically produces a noticeably larger figure than naively applying one flat delay period to the final balance.

Example 4: multiple invoices with different acceptance dates. A supplier raises three invoices to the same buyer in a quarter, accepted on 5 April, 20 May, and 10 June respectively, each with a 45-day agreed term (appointed days: 20 May, 4 July, 25 July). The buyer clears all three together on 1 September. Because each invoice has its own appointed day, each carries a different number of delayed days (104, 59, and 38 days respectively) and must be computed separately, then summed; treating them as one lump delayed amount from a single date understates what is actually owed on the earlier invoices.

How I read the 45-day rule as a seller on credit

Selling on credit is ordinary at our mill, and from that seat the 45-day rule looks less like a weapon and more like a standard for paperwork. The interest at three times the bank rate matters, but what decides whether you can ever use it is dull: a written payment term, a record of the day the goods were delivered, an invoice that carries your Udyam number, and a ledger the buyer has confirmed. A receivables tracker that ages every invoice from its acceptance date, not its invoice date, keeps that record without extra effort.

For a business that both mills and trades, as ours does, there is a question before that one. The 2021 office memoranda keep traders out of the delayed-payment protection, so the rice we mill and the paddy we trade may not sit on the same side of the line. I would not assume one answer covers every invoice; that is a question for the CA, invoice type by invoice type, before any claim is filed.

And the uncomfortable part: a statutory claim against a buyer you want to keep is a last step, not a first one. The reminder, the reconciled statement of account and the direct conversation come first, because that is where many delays end. Collections are also the other half of running the mill's cash credit: every day a buyer holds our money is a day the cash credit carries it. So what we lean on first is not the Act but a cash discount for paying early: 2.5% for payment the same day, 2% within two or three days, 1% within 15 days, and nothing if payment takes a month. The rule's real value, in my view, is that a buyer who knows you keep this paperwork tends to pay on time without ever hearing about Section 16.

What the government says the Bill is expected to address

The Bill text is now public and PIB has summarised the Bill as passed, but this table still reflects the government's stated intent before introduction and has not been rewritten clause by clause. Check the Bill text before relying on any row.

MSME ODR portal vs MSME Samadhaan vs MSEFC

These three names get used almost interchangeably, but they are not the same thing, and using the wrong one for a new filing can cost you time.

The practical rule: if you are filing a new complaint today, use the ODR portal (odr.msme.gov.in), not Samadhaan. Confirm this on the portal itself before you file, since procedures continue to evolve.

Step-by-step: the delayed-payment recovery process

1. Verify eligibility. Confirm your Udyam registration is current and your classification (micro/small) is correct for the relevant invoice date.
2. Reconcile your paperwork. Match the invoice against the purchase order, delivery challan/e-way bill, and any acceptance communication.
3. Calculate the actual deadline. Work out the appointed day from the acceptance (or deemed acceptance) date and the agreed term, capped at 45 days.
4. Send a professional reminder. A short, factual note as the deadline approaches or just after; this alone resolves many delays.
5. Send a formal written demand where appropriate. Reference the MSMED Act and the interest accruing; this is good practice, not a legal precondition to filing.
6. Offer account reconciliation. Give the buyer a clear, itemised statement of what is owed, including your interest computation. Disputes often hide in unreconciled ledgers.
7. Preserve every acknowledgement. Emails, WhatsApp confirmations, signed delivery notes: anything showing the buyer received and accepted the supply.
8. Consider TReDS or a commercial settlement. If cash flow is the immediate problem, discounting the receivable on a TReDS platform (mandatory for many large buyers with turnover above ₹250 crore since mid-2025) may get you paid faster than litigation, even at a discount; see our MSME loan guide for how TReDS and other financing routes compare.
9. File on the current official portal. That means the MSME ODR portal for a new case, with your documents organised and your interest computation attached.
10. Participate in conciliation. Most references that get resolved, get resolved here, so engage seriously rather than treating it as a formality.
11. Understand the arbitration route. If conciliation fails, the MSEFC (or an institution it refers to) arbitrates, ending in a binding award.
12. Enforce the award if needed. An MSEFC arbitration award is enforceable like any other award under the Arbitration and Conciliation Act; a buyer who still does not pay may need to face execution proceedings.

Documents and evidence checklist

• Udyam Registration Certificate: proves your protected status and the date it took effect.
• PAN and, where applicable, GST registration: basic identity/registration proof.
• Purchase order, contract, or work order: fixes the agreed (or absent) payment term.
• Tax invoice / e-invoice: the core claim document.
• E-way bill and delivery challan: proof of movement and delivery date.
• Goods-receipt note or service-completion confirmation: proof of acceptance.
• Email or written acceptance/objection correspondence: establishes the acceptance date or any dispute.
• Buyer and supplier ledger extracts: show the running account and any part-payments.
• Bank statements: proof of non-payment or partial payment, and payment dates.
• Part-payment proof: receipts/bank credit for any amount already received.
• TDS certificate and relevant GST returns: cross-check the transaction was recorded on both sides.
• Balance confirmation from the buyer, if you have one: strong corroborating evidence.
• Demand and reminder communications: shows you tried to resolve this before escalating.
• Quality-objection correspondence, if any: critical if the buyer disputes acceptance.
• Your own interest computation sheet: dated, methodical, ideally reviewed by a professional.
• Authorisation documents / board resolution, where the filer is not the proprietor personally: needed for companies and some LLPs/partnerships.

Section 43B(h): what it means for the buyer's tax return

Section 43B(h) of the Income Tax Act, inserted by the Finance Act, 2023 and effective from Assessment Year 2024-25 onward, is a separate statute from the MSMED Act: it changes when a buyer can claim a tax deduction, not whether a supplier can recover money.

What it covers. Where a buyer has purchased goods or services from a micro or small enterprise supplier and has not paid within the time limit specified under Section 15 of the MSMED Act (the same 45-day cap / agreed-period rule described above), the buyer cannot deduct that expense on the usual accrual basis. The deduction is instead allowed only in the year the payment is actually made.

The trap most buyers miss. Ordinarily, Section 43B has a relaxation: an expense is still deductible in the year it was incurred if it is paid before the tax return's due date, even if unpaid at year-end. This relaxation does not apply to clause (h). If a payment to a micro or small enterprise crosses the MSMED Act's 45-day (or 15-day default) deadline, the deduction is deferred to the year of actual payment, full stop, even if the buyer pays well before filing the return.

Who it does not cover. Section 43B(h) applies only to micro and small enterprise suppliers, not medium enterprises, and, per government clarifications on the trader carve-out, generally not to purchases from registered traders, since traders sit outside the Act's delayed-payment framework in the first place.

What it is not. Section 43B(h) does not itself recover the supplier's dues, does not create a new payment obligation beyond what Section 15 already requires, and, importantly, nothing in the verified reporting on the 2026 MSME Amendment Bill suggests this section is being changed. It sits in the Income Tax Act, administered separately from the MSMED Act amendment process.

Buyer year-end risk. A payment that crosses the MSMED deadline right before the financial year closes (31 March) is the classic trap: the expense cannot be deducted for that year even if paid a few days into the new year, and the deduction shifts to the following year's return. This is precisely why finance teams need to track MSE payment ageing separately from ordinary vendor ageing.

Supplier-side accounting and tax treatment

At a high level (and this is an area for your CA, not a DIY judgement call on a large or disputed amount):

• Principal receivable is recognised as normal trade income/receivable in the ordinary course.
• Statutory interest receivable raises a recognition question: whether and when to book it as income is a matter of accounting policy and the certainty of collection, and views differ.
• GST treatment of statutory interest on a delayed commercial payment needs a specific, current professional read rather than a general assumption either way.
• TDS questions on any interest actually paid also need a specific, current professional read.
• Bad-debt and provisioning considerations apply if the underlying principal itself becomes doubtful, separate from the interest question.

Given how much of this turns on facts, amounts, and current departmental guidance, treat this section as a prompt to ask your CA the right questions, not as the answer itself.

Buyer compliance checklist

If you buy from micro or small suppliers, this checklist pairs with our broader guide to managing vendor payments and credit terms. Our mill sits on both sides of a payment term: it pays farmers and suppliers, often on tighter terms than it gets from its own buyers, and it waits on buyers for the rest. So I read this checklist as a buyer too.

• Capture the supplier's Udyam Registration Number during vendor onboarding, not after a dispute arises.
• Identify micro/small status explicitly in your vendor master; do not assume "MSME" always means protected.
• Record the acceptance date for every delivery, not just the invoice date.
• Record the written credit period agreed, and flag anything your team wrote that exceeds 45 days as unenforceable against the supplier.
• Monitor the 15/45-day deadlines in your payables ageing report as a distinct category from ordinary vendor terms.
• Reconcile disputed invoices promptly and in writing: silence past 15 days locks in deemed acceptance.
• Track year-end unpaid MSE balances specifically, because of the Section 43B(h) deduction-timing risk.
• Coordinate with your tax auditor on any MSE payments crossing the deadline near 31 March.
• Preserve payment evidence and acceptance correspondence: the statutory disclosure requirement and any future MSEFC reference both depend on it.
• Never pressure a supplier to waive statutory interest as a condition of doing business: the waiver has no legal effect on Section 16 in any case.
• Review your financial-statement disclosures on amounts due to micro and small enterprises for accuracy each reporting period.
• Keep vendor master data (Udyam status, classification) refreshed periodically, since a supplier's category can change as it grows.

Real business scenarios

• A rice mill buys packaging and equipment-repair services from a registered micro enterprise. The repair invoice is accepted (no objection raised) and the 45-day clock runs from the day the technician finished the work, not from the invoice date typed up two days later.
• A manufacturer supplies components to a large corporate buyer on a "60-day" PO. The 60-day term has no effect on the supplier's statutory rights; interest still starts accruing at day 46.
• A software services agency invoices a company for a completed sprint. "Acceptance" here is the deemed-acceptance point: if the client never formally signs off but also never objects in writing within 15 days, the clock has already started.
• A wholesaler with Udyam registration sells goods to a retail chain. Whether the wholesaler qualifies as a "trader" excluded from these protections, or as a supplier of goods that does qualify, depends on the specific facts of the registration and activity. This is exactly the kind of boundary case worth a professional check.
• A buyer disputes quality within the 15-day window. The clock resets to the resolution date, so the supplier should get the objection resolved and documented quickly rather than letting it drag.
• A supplier receives a 40% part-payment two months into a delay. Interest continues on the remaining 60% for the rest of the delay, and separately accrued on the full amount for the period before the part-payment: a two-segment calculation, as in Worked Example 3.
• An invoice is raised before the supplier's Udyam registration existed. This sits in an uncertain area; do not assume the 45-day protection applies without checking the registration's effective date against the supply date.
• A buyer pays on day 50, still within the same financial year. The MSMED Act interest liability has already arisen (payment was late), even though the Section 43B(h) year-of-deduction question may resolve differently depending on exactly when in the year this falls.
• A buyer pays after 31 March, crossing the financial year-end. The Section 43B(h) deduction shifts to the year of actual payment, a real cash-tax cost for the buyer's finance team to plan around.
• Multiple invoices under one purchase order, delivered on different dates. Each delivery generally has its own acceptance date and therefore its own appointed day, so treat them separately for interest purposes, as in Worked Example 4.

Mistakes that weaken a claim

1. Treating every "MSME" as automatically protected: medium enterprises are not covered by the 45-day rule at all.
2. Assuming a trader gets the same delayed-payment rights as a manufacturer or service provider: this is specifically excluded by government clarification.
3. Counting from the invoice date instead of the acceptance date: these are often different, and the Act anchors to acceptance.
4. Assuming every invoice automatically gets 45 days: without a written agreement, the default is 15.
5. Ignoring the 15-day appointed-day concept entirely and assuming 45 days always applies.
6. Filing a new complaint on the old Samadhaan workflow instead of the current MSME ODR portal.
7. Computing simple interest instead of compound interest with monthly rests: this understates the real entitlement.
8. Using a stale RBI bank rate instead of checking the figure in force during the delay period.
9. Filing without solid delivery/acceptance evidence: a claim with no proof of when acceptance happened is much weaker.
10. Mixing up principal and interest in a claim or settlement negotiation, muddying what is actually owed.
11. Ignoring part-payments in the interest calculation, instead of splitting the computation around them.
12. Assuming Section 43B(h) itself recovers a supplier's dues: it only affects the buyer's tax deduction timing.
13. Treating the 2026 Amendment Bill's reported provisions as if they were already law: nothing has changed until the amendments are notified into force.
14. Relying on WhatsApp forwards and social media claims about the Bill instead of checking PIB, the Lok Sabha bulletin, or a published Bill text.
15. Publishing or acting on an unverified "implementation date" for changes that have not actually happened.

Decision tree: what should you actually do?

1. Are you a registered micro or small enterprise (Udyam), or dealing with one as a buyer? If no, these specific statutory protections do not apply to you; ordinary contract remedies govern instead.
2. Was the registration valid at the relevant time of supply? If uncertain, get this checked before relying on the 45-day rule for an older invoice.
3. Were the goods/services accepted, and is there a genuine written objection on record? If a live objection exists, resolve or document it before assuming a fixed appointed day.
4. Is there a written payment agreement? If yes, your ceiling is 45 days from acceptance, whatever the paperwork says beyond that. If no, the default is 15 days.
5. Has the applicable period (45 or 15 days) actually expired? If no, nothing is overdue yet; there is no interest claim to make.
6. Has any part-payment been received? If yes, split your interest computation into segments around the part-payment date.
7. Is the claim within the applicable limitation period? If you are unsure how long you have to bring a claim, get this checked; do not assume there is no time limit.
8. Which process should you use today? A new complaint → the MSME ODR portal. A case already filed before the transition → continue tracking it via Samadhaan/ODR as directed by the portal.
9. Is the amount, dispute, or buyer relationship complex or high-value? If yes, get a CA or lawyer to review your computation and documents before filing or settling.

Final action checklist

For suppliers, when your invoice crosses the legal payment deadline:

• Confirm your Udyam status and the correct appointed day for that specific invoice.
• Calculate the delay and the estimated statutory interest using the interactive calculator on this page.
• Send a factual reminder, then a formal written demand referencing the MSMED Act if needed.
• Gather your documents (PO, invoice, delivery/acceptance proof, ledgers) into one file.
• File on the MSME ODR portal if informal follow-up does not resolve it, and engage seriously in conciliation.
• Keep your working-capital buffer intact in the meantime; do not treat the receivable as cash in hand. Track every invoice's due date in an invoice tracker, and model the cash-flow impact of a slow payer using our business cash flow guide.

For buyers, before an MSE invoice crosses the payment deadline:

• Capture Udyam status and classification at vendor onboarding, not after a dispute starts.
• Record the acceptance date accurately, and resolve any quality objection in writing within 15 days.
• Track the 45/15-day deadline in payables ageing as its own category, separate from ordinary vendor terms.
• Never let an MSE balance cross 31 March unpaid without flagging it to your tax team for the Section 43B(h) impact.
• Pay on time: the statutory interest, the tax-deduction risk, and the mandatory disclosure all make a delayed MSE payment more expensive than it looks.

How this page will be updated as the Bill moves:

• Presidential assent: the assent date will be recorded here, with a note that the Act is amended but not yet in force unless the amendment says otherwise.
• Commencement notified in the Gazette: the headline, every "existing law" table and the FAQ answers that now say "not yet" will be rewritten to the new legal position, with the enacted sections cited.
• Bill text compared clause by clause: the "What the government says the Bill is expected to address" table will be replaced with an existing-law-versus-enacted-clause comparison.
• Rules or ODR/MSEFC procedures revised: the ODR-vs-Samadhaan-vs-MSEFC table and the step-by-step process will be updated.
• RBI changes the bank rate: the calculator's default rate, the worked examples and the "as of [date]" rate references will be updated.